Legislative news

This Client Update covers amendments to the laws of the Republic of Kazakhstan (“RK”) and various legal developments introduced in September 2015.

Novelties in Legislation

The laws covered by the present Client Update relate to both public and private sectors. Some of them may be of interest to you as they may affect your business activity in Kazakhstan.

We would like to draw your attention to the following legal acts.

DRAFT LAWS

MANDATORY HEALTH INSURANCE

On 30 September 2015, the Mazhilis of the Parliament of the RK adopted the Draft Law “On Mandatory Health Insurance”.

The Draft Law establishes mandatory health insurance system (“MHI”) covering the following individuals:

• citizens for whom payments and contributions were made;

• college and university full-time students and full-time post-graduates.

MHI also provides medicines coverage.

MHI Payments and Contributions

MHI is funded by payments and contributions. Contributions are made by employers (including foreign legal entities doing business in RK through permanent establishments as well as branches and representative offices of foreign legal entities).

Payments are made by:

• state;

• employees;

• self-employed entrepreneurs;

• private notaries;

• private judicial custodians;

• advocates;

• professional mediators;

• individuals earning income based on the contracts.

The Draft Law establishes the following payment rates:

• as from 1 July 2017, the state must pay 4% of calculation object of its payments;

• as from 1 January 2017, employers must pay 2% of calculation object of their contributions;

• as from 1 January 2019, employees must pay 1% of calculation object of their payments;

• as from 1 January 2017, self-employed entrepreneurs, private notaries, private judicial custodians, professional mediators and individuals earning income based on the contracts must pay 2% of calculation object of their payments.

Calculation object is an employee’s average salary.

PUBLIC PROCUREMENT

On 30 September 2015, the Mazhilis of the Parliament of the RK adopted in the first reading the Draft Law “On Public Procurement Law”.

The Draft Law proposes the following novelties:

• New Antidumping Measures

The Draft Law allows dumping price to be applied at tender if in addition to the security deposit the potential supplier provides a sum of money equal to the decreased sum of the allowed dumping price.

• Public Procurement Participation Restriction

The Draft Law proposes to limit participation of potential suppliers in public procurement, if their property or balance cost of the arrested property and (or) that of engaged sub-supplier is more than 10 percent of the main assets. We note that this measure should help reduce the number of unfair suppliers in state procurement.

• Bad Faith Suppliers Register

The Draft Law proposes empowering courts to make decision with respect to inclusion of a potential supplier into the register of bad faith participants of public procurement.

• Security Deposit

The Draft Law proposes to establish a security deposit amount of 3% from the total amount of the public procurement contract. In case the public procurement contract requires an advance payment, the security deposit amount must be set by the organizer, which should be equal to advance payment amount, but in any case not less than 3 % of the total amount of the public procurement contract.

• Period for Appeal

The Draft Law proposes to establish the period for appeal of action (inaction), decisions of customers, public procurement organizers, public procurement unified organizer, commissions, expert, public procurement unified operator for not later than 5 business days from the official publication of the protocol on public procurement results.

• Preliminary Discussion

The Draft Law introduces preliminary discussion of tender documentation. This will allow potential suppliers to be aware of technical specification requirements and address their comments to the customers in order to correct the defections.

• Contract Execution Suspension

The Draft Law proposes to suspend execution of the contract for 10 days for the period of appeal against the action (inaction), decisions of customer, public procurement organizers, public procurement unified organizer, commissions, expert, public procurement unified operator.

FOREIGNERS IN PUBLIC SERVICE IN KAZAKHSTAN

On 19 September 2015, the Mazhilis of the Parliament of the RK adopted in the first reading the Draft Law “On Changes and Amendments into Certain Legal Acts of the Republic of Kazakhstan on Public Service”.

The key development here is that foreigners may be allowed to be employed for public service in the RK.

AGRICULTURAL COOPERATION

On 23 September 2015, the Mazhilis of the Parliament of the RK adopted the Draft Law “On Agricultural Cooperation”.

The Draft Law proposes combining all types of agricultural cooperatives:

• Agricultural distribution partnership;

• Agricultural processing partnership;

• Agricultural procurement partnership;

• Agricultural service partnership.

Currently these types of agricultural cooperatives are mostly non-commercial organizations carrying out business only in accordance with the respective corporate charter objectives. The Draft Law combines all types of agricultural cooperatives into one commercial legal entity.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please seek a lawyer for a specific advice. Please note that Kazakhstan is an emerging economy and its legislation and legal system are in constant development. Should you have any questions or would like to discuss matters addressed in this Client Update, please contact us.